All eyes on complex buy to let in 2017

by: Chris Bramham, Brightstar’s director of specialist mortgages and buy to let
  • 16/12/2016
  • 0
All eyes on complex buy to let in 2017
It will be interesting to see how landlords react to the reality of reducing tax relief on mortgage interest from April, as I believe the majority of landlords and many brokers do not fully understand the implications as well as they should.

Due to tax changes, some investors will only see a long-term capital gain in property growth and not any form of income. This may be their game plan.

However, if landlords understand the implications of the individual versus a limited company including tax liabilities, such as Capital Gains Tax and Stamp Duty, then there are distinct advantages of moving to a limited company. Those choosing this route must be aware of ramifications around how and when to transfer a property to a special purpose vehicle, hence the importance of getting professional advice.

So, will landlords flock to limited companies and hike rents? I’m not convinced that they are linked. Due to the change in stress rates which are being brought about by the Prudential Regulation Authority from January 2017, we could see some upward pressure on rents. This depends on geographical location, as yields in the south are lower than the north, and there is of course a limit to what can be charged for a rented property.

I think we’ll see new and existing lenders looking to gain market share for professional landlords rather than the individual or amateur landlord, who has been the high street’s bread and butter for the last few years. In fact, the days of these landlords could be numbered as I don’t see how they can make any profit, other than a long-term capital gain, as previously mentioned.

It is possible more properties could come to market if landlords look to unwind their portfolios, but I believe this wouldn’t necessarily be a bad thing, as it could make more stock available for professional landlords and residential buyers to purchase. There also seems to be an appetite around buy to let from specialist lenders and there are already new entrants waiting to deliver their propositions.

I believe we’ll see even more specialisation in terms of products and lenders and this appetite can only be a good thing for the sector as it will make rates and lending criteria even more competitive and attractive in 2017.

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